U.S.: Blackwater's Migraines Multiply

Legal headaches are growing exponentially for the security firm formerly known as Blackwater — once the darling of the military-industrial community.

In separate developments, two former employees of the company charged that the security firm committed 'systematic fraud' under its contracts with the U.S. State Department in Iraq and Afghanistan; the Iraqi government announced it would seize heavy weapons from foreign security firms and expel ex-Blackwater contractors still in the country; and a U.S. Senate hearing learned that Blackwater employees stole more than 500 assault rifles intended for the Afghan police force.

The accusations of fraud came from two former employees who filed a false claims lawsuit that allows the employees, acting as whistleblowers, to win a portion of any public money the government recovers as a result of the information.

The Washington Post reports that the former Blackwater (now known as Xe Services) employees Brad and Melan Davis accused the firm of over-billing for travel, charging for liquor and spa trips and for a having a fire pit built for Blackwater staff parties, and charging for the services of a Filipino prostitute who was kept on 'staff' in Afghanistan as part of the company's 'Morale Welfare Recreation'.

Brad Davis was a former Marine and served as a team leader and security guard, including in a posting in Iraq. Melan Davis, his wife, worked as a finance and payroll employee. Melan Davis has accused the company of terminating her in 2008 because she questioned billing practices. Her husband resigned shortly afterward.

Blackwater changed its name to Xe - pronounced 'zee' - early last year in an effort to shed the negative baggage acquired from its frequent run-ins with Iraqi, Afghan, U.S. and NATO forces. The Blackwater Lodge & Training Centre, the subsidiary that conducts much of the company's overseas operations and domestic training, has been renamed U.S. Training Centre Inc.

In a related development, the Iraqi government announced that it would seize weapons from foreign security firms and expel ex-Blackwater contractors still in the country within days, according to Interior Minister Jawad al-Bolani.

The decision was triggered by the Iraqi government's outrage over the dismissal by a U.S. court of charges against Blackwater Worldwide guards who were accused of killing 17 Iraqi civilians in Baghdad in 2007. The guards said they shot in self-defence.

The judge said there was evidence of prosecutorial misconduct. The U.S. government is appealing the dismissal of the court case. The Iraqi government, which has prohibited Blackwater from operating in Iraq, has hired U.S. lawyers to prepare a lawsuit against the company.

For many Iraqis, the killing of the 17 civilians became emblematic of the impunity from prosecution in Iraq enjoyed by foreign security contractors after the 2003 U.S. invasion. That immunity ended last year under a U.S.-Iraqi security agreement transferring sovereignty back to Iraq.

Parliamentary elections scheduled for Mar. 7 are also fuelling Iraqi anger at Blackwater. Minister Bolani, who is running as the head of his own coalition against a slate headed by Prime Minister Nuri al-Maliki, told Reuters news service that he had 'ordered that the heavy weapons used by some of the foreign security firms be collected.'

And in yet another development, it emerged at a hearing of the Senate armed services committee that Blackwater employees took more than 500 assault rifles intended for the Afghan police force and routinely carried weapons without permission.

It also emerged that to burnish its negative image to win contracting business in Afghanistan, Blackwater created what one senator called a shell company. Senators said that company, Paravant, deceived U.S. officials. It claimed Blackwater was not involved but used Blackwater's past performance to establish its credentials.

'They made representations here that are wildly false,' said Senator Carl Levin, a Democrat. 'Everyone knew in the field it was Blackwater trying to get rid of a negative name.'

Levin warned that Afghan civilians did not distinguish between troops and contractors, and that when contractors misbehaved it turned the population against U.S. forces and encouraged them to side with the Taliban.

The Senate hearing focused in part on a December 2008 accident in which a Blackwater employee was shot in the head during what the company described as a vehicle training exercise but Levin called horseplay.

According to committee investigators, a Blackwater trainer jumped on top of a moving vehicle while carrying a loaded AK47. The vehicle hit a bump and the rifle discharged, striking another trainer in the head. At the hearing Wednesday, former Blackwater officials insisted the Americans were engaged in vehicle training. Levin accused Blackwater of covering up misconduct by describing the shooting as an accident during 'routine' training.

In May, two Afghan civilians were killed in a shooting involving Paravant employees. Investigators later determined that the contractors had 'violated alcohol policies', were not authorised to have weapons and had violated other policies. The U.S. Justice Department said the shooting had a detrimental effect on U.S. national security.

Former Paravant official Brian McCracken acknowledged the company's trainers were carrying weapons without authorisation but said they often operated in dangerous environments among armed Afghans, without U.S. army protection.

In the aftermath of the terrorist attacks on the U.S. in September 2001, Blackwater was awarded contracts worth billions of dollars in Iraq and Afghanistan. The company provided security for U.S. embassy personnel and important visitors in those locations.

Erik Prince, Blackwater's founder and former CEO, was a substantial contributor to the Republican Party and had close ties to senior officials in the administration of George W. Bush.